H2O Asset Management will pay €250 million (£215 million) to compensate investors who have been unable to access funds since 2020, according to regulators.
Following an agreement to avoid a fine, the Financial Conduct Authority (FCA) said H2O would cancel UK operations by the end of the year.
H2O was, until 2022, a subsidiary of French bank Natixis.
The latest action from the UK regulator comes on the back of a long-running investigation, which found the asset manager had not carried out proper due diligence on investments relating to companies owned by German entrepreneur Lars Windhorst.
“The investments were high risk and hard to sell,” the FCA said, with funds worth €1.6 billion as of 2020 said to be effectively trapped.
Over 50 undeclared cases of H2O employees receiving hospitality, including on a superyacht and private jet, were also discovered by the regulator.
“H2O’s job was to manage its funds properly and protect investors,” FCA joint executive enforcement director Steve Smart said in a statement.
“It failed to do this and, to make matters worse, it repeatedly provided misleading information to the FCA.”
This included false and misleading documents, such as fabricated records and minutes of meetings.
“Through this settlement, the FCA has secured money for affected investors and agreement that H2O will stop operating regulated business in the UK,” Smart added.